Viad Corp. (VVI) Q4 2022 Earnings Call Transcript

Viad Corp. (NYSE:VVI) Q4 2022 Earnings Conference Call February 9, 2023 5:00 PM ET

Company Participants

Carrie Long – Investor Relations

Steve Moster – President and Chief Executive Officer and President-GES

David Barry – President of Pursuit

Ellen Ingersoll – Chief financial Officer

Conference Call Participants

Kartik Mehta – Northcoast Research

Bryan Maher – B. Riley Securities

Tyler Batory – Oppenheimer

Barry Haimes – Sage Asset Management

Operator

Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Viad Corp’s Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions]

Carrie Long, you may begin your conference.

Carrie Long

Good afternoon, and thank you for joining us for Viad’s 2022 Fourth Quarter and Full Year Earnings Conference Call. We issued our earnings press release after market closed today, along with an earnings presentation, which are both available on our website at viad.com. We will be referencing specific pages from the presentation during the call as we discuss our business performance and outlook. I also want to point out that our earnings press release and presentation contain important disclosures regarding non-GAAP measures that we will be referring to during the call, including adjusted EBITDA and net income or loss before other items.

During the call, you will hear from Steve Moster, our President and CEO and President of GES; David Barry, our President of Pursuit; and Ellen Ingersoll, our Chief Financial Officer.

Before turning the call over to Steve, I want to remind everyone that certain statements made during the call, which are not historical facts, may constitute forward-looking statements. Information concerning business and other risk factors that could cause actual results to materially differ from those in the forward-looking statements can be found in our annual, quarterly and other current reports filed with the SEC.

And with that, I will turn the call over to Steve.

Steve Moster

Good afternoon, and thank you for joining us. To start the call, I’d like to thank our team members around the world for their continued dedication and efforts, which are reflected in our fourth quarter and full year results.

Starting on Page 4, I want to provide my highlights on the quarter and our path forward. David, Ellen, and I will expand on these highlights later in the call to give you more clarity on what we’re seeing in each business. First, I’m very pleased with our performance in 2022. Pursuit achieved record revenue in the year due to the continued recovery of the adventure travel industry and the steady investments we’ve made to drive growth through our Refresh, Build, Buy initiatives. GES significantly outperformed our expectations in 2022 as the live event industry came roaring back from pandemic levels. Second, in 2022, Viad delivered strong results through our strategic focus on scaling Pursuit and improving the profitability of GES, despite several macro external forces.

During the year, Pursuit continued its growth trajectory with the additions of a high-quality attraction experience to our Glacier Park collection and the remarkable new hotel in downtown Jasper as well as made headway on other exciting growth investments, including FlyOver Chicago and a new mountain coaster at our Golden Skybridge traction. Also during the year, GES continued to make meaningful progress to improve the profitability of the business through GES exhibitions transformed cost structure and inspires new and existing client wins.

And lastly, I’m excited about the path ahead for Viad businesses. I expect growth to continue in 2023 and beyond based on fewer border restrictions on international travel, the acceleration of Pursuit’s new experiences and the full recovery of our businesses.

And now I’d like to turn the call over to Ellen to discuss our fourth quarter and full year performance in more detail. Ellen?

Ellen Ingersoll

Thanks, Steve. Before I jump into our current quarter results, I’d like to spend a few minutes covering an 8-K that we filed just prior to our earnings press release this afternoon. During our year-end close review procedures, we identified an error relating to our accounting for a finance lease obligation at Sky Lagoon. That lease liability is recorded on Sky Logan’s balance sheet in Icelandic krona, but is payable in U.S. dollars and therefore, requires re-measurement on a monthly basis with any changes in valuation being recorded as noncash foreign exchange gains or losses. This re-measurement had not been taking place prior to December 31, 2022.

As a result, the lease liability that we reported as of September 30, 2022, was understated by $5 million, with a corresponding understatement of cost of services of $5 million, an overstatement of net income attributable to Viad of $2 million relating to the FX loss that should have been recorded. We plan to file an amended and restated Form 10-Q for the 2022 third quarter to correct this accounting error. The re-measurement of this lease liability resulted in an FX gain of $804,000 during the fourth quarter, bringing the 2022 full year FX loss to $4.2 million. FX gains and losses are included in cost of services on our income statement and we have and will be excluding these noncash gains and losses from our non-GAAP measures of adjusted EBITDA and net loss or income before other items.

Now on to our fourth quarter results.

As shown on Page 6, we delivered consolidated revenue of $248 million during the fourth quarter. This is up 35% or $64.5 million year-over-year, driven by 46% growth at Pursuit and 34% growth at GES. Net loss attributable to Viad was $5.7 million as compared to a loss of $22.5 million in the 2021 fourth quarter. During the quarter, we completed the sale of ARM Services, a noncore business within GES for approximately $30 million and recorded a gain on that sale of $19.6 million. Excluding that gain and certain other items, our net loss attributable to Viad was $25.5 million for the quarter as compared to a net loss before other items of $22.5 million in the prior year fourth quarter.

Our consolidated adjusted EBITDA of negative $2 million improved by $1.8 million year-over-year and was in line with our prior guidance. GES adjusted EBITDA of $12.7 million increased $3.1 million year-over-year and surpassed the high end of our prior guidance range as we continued to see strengthening of live event activity and great execution by the GES team.

Pursuit adjusted EBITDA was negative $11.3 million and came in slightly below prior year and our prior guidance range, primarily due to higher-than-anticipated expenses in the seasonally slow quarter.

Turning to Pursuit’s year-over-year performance on Page 7. Fourth quarter revenue of $34.1 million grew $10.8 million year-over-year, with same-store revenue growth of $5.9 million or 32% and $4.8 million of revenue growth from New Experiences that we opened or acquired during 2021 and 2022. The same-store revenue growth was largely the result of stronger leisure travel to our Canadian experiences, resulting from reduced COVID restrictions as well as our efforts to refresh existing properties and maximize revenue.

Fourth quarter adjusted EBITDA was negative $11.3 million as compared to negative $9.9 million in the prior year. The decline of $1.4 million was driven primarily by higher expenses versus the prior year, including insurance and compensation-related expenses as well as COVID wage subsidies received in 2021 that did not repeat in 2022. The New Experiences we opened or acquired during 2021 and 2022 delivered positive adjusted EBITDA of approximately $800,000 during the quarter, which is a $1.6 million improvement versus the prior year, reflecting the continued ramping of Sky Lagoon and FlyOver Las Vegas as well as the addition of the Forest Park Hotel, partially offset by seasonal losses from Glacier Raft Company and Golden Skybridge.

Now switching over to GES’ fourth quarter results on Page 8.

GES delivered total revenue of $213.9 million. Spiro revenue grew 31.8% or $17.4 million and GES exhibitions revenue grew 32.7% or $35.4 million. As Steve will review later, we continue to see strong levels of recovery toward pre-pandemic live event activity. GES’ fourth quarter adjusted EBITDA improved by $3.1 million year-over-year, reflecting the increase in revenue as well as higher cost to support the more robust business activity. At the end of 2021 and into early 2022, GES was running with a very lean cost structure as we cautiously rebuilt the workforce as revenue returns.

By the third quarter, we had returned to a normalized workforce level for GES exhibitions and we are continuing to prudently add talent within Spiro. We remain acutely focused on maximizing profitability and cash flows within GES.

Now switching over to our full year results on Page 9. Viad’s full year revenue more than doubled versus 2021 and consolidated adjusted EBITDA reached $116.1 million, up from $1.3 million in 2021. While not everything went as planned this year, we are extremely pleased with how well our teams executed to deliver strong results in customer service as our industry saw a rapid improvement from the suppressed levels of activity during the pandemic. Pursuit’s full year revenue grew 60% and reached a record level of nearly $300 million.

Full year adjusted EBITDA was $67.9 million, up $25.3 million year-over-year. New Experiences acquired or opened during ’21 and ’22, contributed revenue of $43.2 million, adjusted EBITDA of $6.9 million and an adjusted EBITDA margin of 16%. We expect the contribution from these New Experiences and their margins will continue to grow in 2023 and beyond. On a same-store basis, Pursuit’s adjusted EBITDA improved by $21.6 million on a revenue increase of $84.7 million or 49% and same-store adjusted EBITDA margin improved by 80 basis points. Margin expansion versus 2021 was constrained by several factors, which we primarily view as transitory pandemic impacts, including the mix of guests, staffing-related challenges and other cost increases that we were not fully able to offset through price increases.

At GES, we delivered an adjusted EBITDA improvement of $91.6 million versus 2021 on a revenue increase of $507.7 million. Full year adjusted EBITDA margin was 7.4% as we leveraged GES’ lower cost structure to drive strong flow-through as revenue increased nearly 160% year-over-year. GES margins were particularly strong during the second quarter as revenue returned far more quickly than we had anticipated in our staffing levels. We experienced deceleration of margins during the third quarter as we continued rebuilding our service teams for the sustained level of business activity. Margins improved slightly during the fourth quarter as we maintain a sharp focus on cost management and cash flow.

Now I’ll quickly cover some balance sheet and cash flow items before we dive more deeply into business highlights. We ended the fourth quarter with total liquidity of approximately $146 million, comprising $60 million in cash and $87 million of capacity available on our revolving credit facility. Our cash flow from operations during the full year was an inflow of approximately $72 million.

Our capital expenditures totaled about $67 million for the full year and were mainly at Pursuit, including growth CapEx for the Forest Park Hotel, the mountain coaster at Golden Skybridge and FlyOver Chicago.

Our cash flow from operations during the quarter was an outflow of approximately $33 million. Our capital expenditures totaled about $12 million for the quarter and were mainly at Pursuit, including growth CapEx for FlyOver Chicago. On December 15, we completed the sale of the assets of ON Services, a U.S. based audiovisual services business that operates as part of GES for cash proceeds of approximately $30 million. This transaction enhances our balance sheet and builds on the strategic transformational changes that we have implemented at GES over the past few years by further simplifying GES’ operating model. At December 31, our debt totaled approximately $482 million, including $395 million on our term loan base, financing lease obligations of approximately $65 million and $11 million construction loan to help fund the development of the Forest Park Hotel and other debt of approximately $11 million.

Additional details can be found in the appendix of our earnings presentation.

And now I’ll turn the call over to David to discuss Pursuit.

David Barry

Thanks, Ellen. We’re proud to have delivered record quarterly revenue in each of the 4 quarters of 2022, along with 59% year-over-year growth in full year adjusted EBITDA. These financial results were not as strong as we projected entering 2022. We continue to experience travel restrictions and the temporal effects of the COVID pandemic, which impacted same-store results and the first full year of operations at our newer experiences. And we saw slower-than-expected ramping of FlyOver Las Vegas as our marketing efforts continue to take hold and increase awareness of this new attraction on Las Vegas Boulevard. COVID has thrown many headwinds our way over the past several seasons and we’re pleased to be seeing some meaningful relief on that front.

Our performance is on track to strongly improve in 2023, and we’re looking forward to delivering record revenue and adjusted EBITDA in the year to come. But more to come on that shortly, first, let’s take a review of our 2022 performance.

Page 11 of our earnings presentation reflects our ongoing commitment to Pursuit’s Refresh, Build, Buy strategy and its impact on our revenue growth. The 11 New Experiences that we’ve opened or acquired from 2019 through 2022, collectively delivered $88.1 million in revenue in 2022, which is nearly 30% of Pursuit’s total revenue for the year. As guest awareness continues to build and visitation from long-haul destination markets continues to return, we anticipate further growth and margin expansion at these iconic experiences. Refresh, Build, Buy is also about improving performance at existing experiences and we’ve been successful driving revenue growth at the experiences that were part of Pursuit prior to 2019.On a same-store basis versus 2019, Pursuit grew full year 2022 revenue by 5.5% despite pandemic-related headwinds as we remain focused on elevating the guest experience and price optimization.

Relative to 2019, we drove stronger same-store revenues through lodging, food and beverage and retail, while same-store ticket revenue from our attractions remain below 2019 levels due to their greater reliance on long-haul international group leisure travel.

Page 12 in the deck covers attractions performance for full year 2022. On a same-store basis, our attractions visits reached 85% of 2019 levels. However, 2022 overall ticket revenue of $115 million grew by approximately 36% versus 2019 as we invested in new attractions and drove higher effective ticket prices. We’re thrilled to have welcomed a record total of 2.9 million attraction visitors during ’22 with 88% growth in overall ticket revenue as compared to ’21. And we’re looking forward to additional upside from the gradual return of international visitors from Asia-Pacific markets and other destination markets in 2023 and beyond.

Page 13 covers fourth quarter attractions performance and I’d just like to highlight that we saw continued acceleration at our newer year-round attractions.

At FlyOver Las Vegas, we’ve made important inroads into attractions ticket distribution networks that are fueling growth. Q4 visits increased 21% from the third quarter and 35% from the same period in 2021. And we’re proud to have won multiple awards for the experience, including silver for best immersive experience by bestoflasvegas.com. Sky Lagoon in Iceland also delivered strong fourth quarter results with visitors increasing 61% from the prior period — from the same period prior year.

Now I’ll cover results and performance metrics at our lodging properties, which we reference on Page 14 of our earnings presentation. 2022 rooms revenue of $77 million grew by 34% year-over-year and by 31% compared to 2019. The year-over-year growth was driven by higher occupancy, which nearly returned to 2019 levels as well as higher ADRs. The growth versus 2019 was driven by our investments to expand and refresh our lodging portfolio with additional rooms and higher ADRs. On a same-store basis, RevPAR increased 35% year-over-year and 10% versus 2019, reflecting increases in both occupancy and average daily rate.

On Page 15, that shows our lodging performance remained strong during the 2022 fourth quarter. Rooms revenue at our year-round properties in Vance, Jasper and Montana increased 17% year-over-year. And similar to our attractions, we see the continuation of a strong year-over-year growth into the first quarter of 2023.

Moving on to our ancillary revenue streams. Pursuit, Food and Beverage businesses delivered revenue of $47.3 million in 2022 and continues to be an integral part of the hospitality experience. We made strategic investments to improve the culinary experience at restaurants located within our hotels throughout the year and again delivered healthy year-over-year growth of 63%. 2022 also saw strong revenue growth in our retail business, which increased 33% year-over-year to $33.5 million. And we view retail as a key growth lever into the future and driving retail growth is an important part of our focus on returning to historical margins.

All right. So now let’s turn our attention to the year ahead. We continue to see performance at our newer experiences accelerate. And that coupled with the return of international leisure travel guests and healthy early season booking indicators has us optimistic for a strong and successful 2023. We see no dents in the armor in terms of demand for the ’23 season as booking pace remains strong.

For our Canadian experiences, 2023 will be our first season in 3 years that will not be constrained by COVID restrictions, testing and quarantine risk. And all of these testing and quarantine restrictions to enter Canada were finally lifted on October 1, 2022. And this is already showing a positive impact and although still early in the ’23 year, we’re seeing improvement in year-over-year pacing in each operating geography. Through January, Pursuit revenue is pacing well ahead of the same period in 2022. Canada is seen as a safe destination and is enjoying strong visitation from the United States in the current ski season. Demand for Pursuits Alaska and Montana product is also strong with a strong return of cruise line arrivals planned for summer ’23 in Alaska and continued demand for iconic Glacier National Park in the great state of Montana.

While still early in the booking cycle, we’re pleased with our early season bookings pace, which lends confidence to our full year expectations. We expect our attractions visitation will improve to approximately 95% of 2019 levels on a same-store basis. Demand from Western European operators in the UK markets is strong for all of our destinations from Iceland to Western Canada and the Western United States. As China reopens to the world, we expect to see a slow increase in inbound visitation to Western Canada during 2023. And this specifically will come in two segments, visiting friends and relatives and FIT. China’s reopening was late for tour and travel partners to resume their historical programs given the short notice for ’23 bookings. Pre-pandemic, China exported 155 million tourists to the world and we expect it will take two seasons for outbound visitation to return to full momentum.

We do see very strong demand from Chinese operators for the ’24 season.

In Iceland, our research suggests that Iceland will benefit from an increase in international visitation relative to pre-pandemic 2019 levels. We anticipate this increase to be about 8% in the first half of the year, which will, in turn, benefit both Sky Lagoon and FlyOver Iceland. So we’re acutely focused on three important and related success factors in 2023, revenue growth, margin expansion and winning the war for talent. So starting with revenue growth, I just highlighted the strong and improving demand trends we’re experiencing. With that backdrop, we are sharply focused on ensuring that our new experiences as well as those that have been slower to recover from the pandemic, regain traction and perform to our expectations throughout the year. This means maintaining a heavy focus on driving guest awareness and visitation at our New Experiences, including FlyOver Las Vegas and the Golden Skybridge. It also means executing strategies and tactics for regaining pre-pandemic visitation volumes at certain attractions that are more dependent on long-haul international guest volumes such as the Columbia ICO Glacier Adventure and Skywalk. Margin expansion is another critical focus area, and I’d like to take a minute and share our view on how we expect margins to recover in 2023 and beyond.

As Ellen touched on earlier, our 2022 adjusted EBITDA margin of 22.7% was constrained by pandemic headwinds on cost and mix of guests as well as the ramping of our New Experiences. In 2023, we expect to see meaningful margin expansion driven primarily by increased visitation at our high-margin attractions, but not a full return to pre-pandemic levels.

As you know, our attractions are built for volume, meaning that the profitability increases significantly when guest visitation is high, once fixed cost breakeven is achieved. The revenue from every incremental guest flows at a very high rate to our bottom line.

Additionally, staffing pressures are easing and we’re actively ratcheting back the extraordinary measures put in place due to the pandemic labor shortages and disruptions to the foreign worker programs in both Canada and U.S. Beyond ’23, we expect margins will once again exceed 30%.There are a few key drivers of margin expansion in 2024 and beyond that we’re focused on. First is achieving attractions visitation in line with 2019 on a same-store basis; three of the seven attractions that we owned and operated in full in 2019 are not expected to return to 2019 levels in 2023 and recapturing that guest volume is a critical part of our margin recovery strategy.

Contracting pace and demand are the best indicators of future years and we’re pleased to report that our travel trade partners across the world are returning in earnest to historic levels of contracting and we see strong interest for ’24 and ’25 seasons as China shifts its COVID policies and begins to reopen.

Our second driver relates back to my comments about ensuring that our businesses perform and our long-range plan anticipates continued growth at our newer attractions and specifically FlyOver Las Vegas and the Golden Skybridge in ’24 and beyond. We also expect to launch FlyOver Chicago in the first half of ’24, and we expect FlyOver Chicago to be accretive to Pursuit’s EBITDA margin.

And the third driver, specifically on margin and is really a careful focus on labor and expense management. And that brings me to our final critical success factor for 2023, winning the war for talent. Our early season hiring metrics are trending positively and we’re starting to see normalization across the talent acquisition ecosystem, including an increase in the number of seasonal team members who are returning to pursue for another summer and in the availability of the international workforce supply.

In addition, with a vision to be the world’s leading provider of attraction and hospitality experiences, we will execute against a number of important investments centered on improving the guest and team member experience at several locations. Some examples include a refresh of the original founders cabins and the Pines restaurant at Pyramid Lake Lodge in Jasper, upgrades to our workforce housing facilities and exciting new content for our flyover attractions. We continue to seek and evaluate investment opportunities in multiple geographies for the next great Pursuit experience.

So in closing, we believe that 2023 will mark the return of a more normal operating environment across all of our geographies and we very much look forward to welcoming a record number of guests to Pursuit iconic, unforgettable and inspiring experiences.

Steve, back to you.

Steve Moster

Thanks, David. Now let me switch gears and talk about the GES business, which includes both GES Exhibitions and our marketing agency, Spiro. During the fourth quarter, GES continued to perform better than expected as revenue continued to recover above our expectations. In addition to delivering strong top line growth, GES drove a substantial increase in profitability during the fourth quarter with adjusted EBITDA of $1.7 million above the high end of our guidance range for the quarter.

First, I’d like to talk about the performance of GES Exhibitions, which provides trade show services to leading event organizers in North America, Europe and United Arab Emirates. During the fourth quarter, GES Exhibitions delivered $143.6 million in revenue and $6.9 million in EBITDA.

Like prior quarters, the strong results were driven by a faster-than-expected recovery. During the fourth quarter, GES Exhibitions continue to experience improvement in the size of events produced. As shown on Page 18, U.S. same-show revenue reached 93% of 2019 levels, up from 91% in the third quarter. I’m very encouraged by the pace of recovery of trade shows at GES Exhibitions. The rapid recovery relative to 2021 illustrates the resilience, strength and value of trade shows as a major component of today’s corporate marketing channels. The recovery, however, has not been uniform as there continues to be significant variability in the pace of recovery across a broad set of trade shows with individual shows performing between 70% and 140% of their pre-pandemic size. As the lower performing shows fully recover, this will be a tailwind for the GES Exhibitions’ performance.

Next, I’d like to discuss the fourth quarter at Spiro, our experiential marketing agency, which serves as the agency of record for Fortune 1000 corporate clients. During the fourth quarter, Spiro delivered $72.1 million in revenue and $5.8 million in EBITDA. Like the trade show side of GES, Spiro saw a strong level of marketing spend from our corporate clients, which are concentrated in the pharmaceutical, medical, aerospace and defense, industrial and technology industries.

During the fourth quarter, Spiro marketing clients spent approximately 90% of the level spent in 2019 on a same-store basis. During the quarter, Spiro won several new clients, including Dentsply Sirona, which will have an impact in 2023 and beyond. Our first project for Dentsply Sirona will be producing their 2023 Implant World Summit in Avon’s Greece for Dentsply top implant dentists, periodontist and implant surgeons. These new client wins demonstrate the strength of Spiro’s creative, strategic and production talent on an international stage.

The fourth quarter finished a rewarding but challenging year for the GES business. From an uncertain start with Omicron-driven cancellations and postponements in the first quarter, we experienced a rapid acceleration in live event activity beginning in the second quarter. Revenue recovered much faster than expected, while the business bought through labor shortages, supply chain challenges and high levels of uncertainty. I’m very pleased with how the team responded to these adversities and their hard work will position the business well for 2023.

Now I’d like to give you some insights into our expectations for the new year and Ellen will cover our guidance later in the call. In 2023, I expect GES Exhibitions same-show revenue to stay in line with what we experienced in 2022 at close to 90% of 2019 levels.

While medium and large corporations quickly returned to trade shows in 2022, we have not yet seen significant participation from international companies and smaller domestic companies. Given the strength of trade shows, I anticipate these companies will participate again in the future, but not until late 2023 or early 2024.Additionally, GES Exhibitions will experience year-over-year revenue headwinds in 2023 of approximately $20 million from our sale of ON Services and approximately $30 million from what we call negative show rotation, driven by the timing of major non-annual shows. Show rotation will turn positive in 2024, bringing an expected year-over-year increase in revenue of approximately $60 million for GES Exhibitions. At Spiro, I expect client marketing spending will be similar to 2022 levels at roughly 90% of 2019. Additionally, I anticipate growth from new clients won in 2022 that will start their 2023 marketing programs with Spiro.

We have seen great success in winning new business from new clients and existing clients and intend to prudently invest in additional resources to service our clients and drive continued growth with expanded capabilities.

And now I’ll turn the call over to Ellen to talk a little bit about our financial outlook.

Ellen Ingersoll

Thanks, Steve. We expect continued growth in 2023 and are focused on maximizing performance from our existing businesses. As shown on Page 21, we expect Pursuit’s adjusted EBITDA for the full 2023 year to be in the range of $85 million to $95 million as compared to $67.9 million in 2022. Revenue is expected to increase between 10% and 15% year-over-year, primarily driven by the lifting of all COVID restrictions at the Canadian border, acceleration of new experiences and ongoing focus on improving the guest experience through our Refresh, Build, Buy growth strategy.

For the seasonally slow first quarter, we expect Pursuit’s adjusted EBITDA loss to be in the range of $14 million to $11 million as compared to $11.5 million in 2022. Revenue is expected to be in the range of $28 million to $32 million, up from $23.8 million in 2022 with continued improvements in international leisure travel, removal of border restrictions into Canada and all signs pointing to a much stronger visitation in 2023.

Pursuit is entering the year with higher staffing levels as compared to the same time last year when the world was just beginning to relax restrictions and facing concerns relating to the Omicron variant. We anticipate that Pursuit’s full year adjusted EBITDA margin will expand as our attraction visitation continues to recover. The performance of our newer experiences improved and pandemic error cost pressures ease.

Now turning to GES on Page 22. We expect GES’ adjusted EBITDA for the 2023 full year to be in the range of $48 million to $58 million as compared to $61 million in 2022. Revenue is expected to decrease about 5% year-over-year, primarily due to headwinds from sale of ARM Services, which contributed about $50 million in revenue in 2022 and negative share rotation revenue of about $30 million.

We expect GES’ full year adjusted EBITDA margin will be temporarily impacted in 2023 due to the year-over-year decline in revenue and investments to fuel Spiro’s growth in ’23 and beyond.

As Steve mentioned, we anticipate GES Exhibitions same share revenue and Spiro clients market spend to remain at about 90% of 2019 pre-pandemic levels. We’re also expecting growth from new client wins at Spiro. For the first quarter, we expect GES’ adjusted EBITDA to be in the range of $8 million to $11 million as compared to $2.7 million in 2022.Revenue is expected to be in the range of $195 million to $215 million, reflecting a relatively easy comparison to $153.6 million in the Omicron-impacted first quarter of 2022. The stronger first quarter performance and new wins in Spiro will mostly offset the expected headwinds during the balance of the year. We expect the show rotation headwind to be most pronounced during the third quarter with about $50 million in revenue rotating out. We expect modest positive rotation in each of the first, second and fourth quarters.

Now on to cash flow outlook. For the full year, we currently expect an operating cash inflow of $65 million to $75 million, with the first quarter outflow in the range of $5 million to $10 million. We expect full year capital expenditures of $75 million to $85 million, including $15 million to $20 million in the first quarter. This level of CapEx reflects our commitment to Pursuit Refresh, Build, Buy growth strategy with growth CapEx for key projects, including FlyOver Chicago. In connection with our 2023 capital expenditure outlook, I’d also like to provide a quick update on our proposed flyover project in Toronto, Ontario. As we’ve mentioned previously, the permitting and approval process for this project has experienced significant COVID and other related delays since the original project inception in 2019.

The final permits and project approvals remain pending with the city of Toronto. At this time, we expect to incur minimal capital expenditures related to the FlyOver Toronto project in 2023 and we no longer expect to open its attraction in 2024, as we had previously anticipated. We will provide further updates regarding FlyOver Toronto as and when available.

And now I’ll turn the call back over to Steve for some concluding remarks.

Steve Moster

Thanks, Ellen. I’m very proud of what we accomplished in 2022 and I’m thrilled about the growth that lies ahead in 2023 and beyond on both sides of the business with our new world-class experiences at Pursuit and a stronger, more profitable GES. As we look ahead to 2024, Pursuit is well-positioned for solid top line growth and margin expansion from a more fulsome recovery of long-haul international travel trade visitation, the continued ramping of our New Experiences and the opening of FlyOver Chicago. For GES, we expect strong tailwinds in 2024 from positive show rotation of approximately $70 million and an anticipated full recovery of show sizes and corporate client marketing budgets. GES is expected to reach its target of greater than 8% adjusted EBITDA margin in 2024. We remain committed to our strategy to create extraordinary experiences and strong returns for our shareholders.

For Pursuit, we continue to selectively invest in high-return growth opportunities to advance our proven Refresh, Build, Buy strategy. For GES, we will build on the progress we’ve made to date to improve the margin profile and resume generating strong cash flow through our lower cost structure and focus on higher-margin clients and services. I want to thank our hard-working and dedicated employees and our shareholders for your continued support in Viad.

And with that, we’ll open up the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Kartik Mehta with Northcoast Research.

Kartik Mehta

Steve, just a couple of questions on Pursuit. Maybe I don’t know if it’s too early, but just your outlook, 2023 from early reservations or early demand for some of the properties would be helpful.

Steve Moster

Yes. Thanks, Kartik. I’ll actually let David take this one. He’s closest to it.

David Barry

Yes, Kartik, demand is positive. We’re seeing increasing demand in all channels. What’s interesting, everything from web traffic, which is up 20% year-over-year and up 70% from 2019 demand, specifically in Alaska and Montana, Western Canada is all pacing well ahead. So it feels good. We’re off to a good start.

Kartik Mehta

Steve, you talked a little bit about show rotation and I’m wondering, is this just normal show rotation? Or have you seen something or large or was canceled or changed because of the economic environment or just COVID?

Steve Moster

Kartik, that’s a good question. This is the normal cadence of the non-annual events that we see. So what we laid out for ’23 and for ’24 is what we expect based on these non-annual events coming back into the calendar for those years.

Kartik Mehta

And then just one last one, both on the Pursuit side and on GES. Obviously, in the past, there were some issues with trying to find employees and I think you addressed that a little bit on the call. I’m wondering, one, you kind of — do you feel like you’re fully staffed? And two, maybe what’s happening to wage inflation and what you anticipated in 2023 from that?

Steve Moster

Yes. Thanks, Kartik. In terms of labor on the GES side of the business, we are successfully finding talented people to join the team. We are on the exhibition side, very close to, if not at the staffing level that we need for this level of revenue. And within Spiro, we continue to selectively add people as we’re building out the capabilities. So we’re able to find the talent, which is — in 2022, there was a bit of a challenge in that — in the heart of the pandemic. So I feel like a lot of that is past us and we’re finding good quality candidates to join the team. And I’ll let David talk a little bit about Pursuit.

David Barry

Yes, it’s encouraging. We continue to have strong demand. We’re pacing ahead for the hiring of team members. We’re able to put some of the incentives that we have put in place during the worst of the pandemic to get folks to work. We’re able to put those back on the shelf, which is encouraging. That will help from a margin perspective. The foreign worker programs in both the U.S. and Canada are back in full swing. So that’s quite encouraging because both the J1s and then the longer Commonwealth is as having them available really helps on a team level. So quite encouraged by the hiring pacing ahead of where we’ve been historically and looking to a good season.

Operator

Your next question comes from the line of Bryan Maher with B. Riley Securities.

Bryan Maher

On the show rotation, you talked about the non-annuals and kind of the third quarter’s week 1, 2 and 4 strong. Can you give us a little more granularity as to kind of what big commenting or exhibitions are not going to be in the year and maybe some that are being added? Just some of the bigger ones to give us a little color.

Ellen Ingersoll

Yes. On the show rotation we had IMTS last third quarter. We won’t have that this third quarter and International Woodworking we had last third quarter as well. The ones rotating in, I mean, they’re fairly small, are rotation in, in Q1 and Q2 and Q4 ranges from $5 million to $10 million.Bryan, just one more thing, sorry. We do have air shows that switch quarters. So we have in ’23, the Paris Air Show, and that is in the second quarter. And in ’22, we had the Farmborough Air Show, that was in Q3.

Bryan Maher

Okay. And maybe remind us what big ones come back in 2024?

Ellen Ingersoll

Yes. Sure. So in 2024, we have IMTS rotating back in again, and we have MINExpo rotating back in as well as Woodworking. MINExpo is only every 4 years or so, so we didn’t have that in ’22.

Bryan Maher

And then on the Pursuit side, listening to the commentary and kind of seeing what you’ve been developing over the past couple of years. Is it safe to say that there’s no real new attractions currently expected for 2023 or that at least have been announced publicly?

David Barry

Yes, you’re quite correct. But what’s exciting is that we’re, I think, going to be performing at higher levels with the increase in international visitation. And obviously, it’s a more normal year. I mean one of the challenges in ’22 was that we expected border restrictions to lift early in the first quarter of ’22 and they didn’t lift until October 1st. And so our visitation from the U.S. was a bit throttled. And we’re just excited that this is the first year in 3 years that, Bryan, we’re operating with no restrictions. Nobody’s going to get — have to go into quarantine when they arrive, and that’s, I think, going to drive visitation throughout the whole summer.

Bryan Maher

Right. I made some notes here. Refined grow enhance kind of seems like the theme at Pursuit this year 2023. Kind of thinking about the percentage of long-haul international travel, I guess, mainly from Asia. What do you think you’ll end up seeing in 2023? I think you said maybe two years to come back to seasons to come back. Relative to 2019 levels, where do you think you could shake out for this year?

David Barry

It’s a bit tricky to say, but think about it on a global level. So China exports annually and its hay-day with no restrictions about 155 million tourists leave China and go out into the world and experience that. This season is going to be late for tour and travel partners because they really didn’t get the news until December. And so what we expect we’ll see will be an increase, obviously, in visiting friends and relatives and also FIT travelers leaving China. It’s constrained with a couple of other things, which is the aircraft lift is not back to traditional levels. So that’s going to, again, have an impact.

But we’ll definitely see an increase. And what’s most exciting is the contracting demand for ’24 and for ’25 is moving at real pace. So I think we’ll see more of a return to normality in the ’24 year, but we definitely will get it on for ’23. It’s just hard to predict what that’s going to be given how late the announcement was.

Bryan Maher

Okay. And then last for me and maybe both Steve and Dave, you can both weigh in for each of your segments. Given what we’re seeing with macroeconomic uncertainty, rising interest rates, various geopolitical issues around the world. Are you seeing any spots of weakness even if it’s just anecdotally in any parts of your business as yet?

Steve Moster

No. I’ll speak to the GES side of the business. And we’ve been looking heavily into the kind of first quarter. We have visibility into kind of first quarter, maybe early second quarter events that are coming up in client spend. And I currently don’t see any signs of pullback in any way at this point. So if anything, the momentum kind of continues from Q4 into Q1.

David Barry

Yes, very similar. I mean, we’re not seeing any consumer price resistance as we continue to take rate in a variety of things. We’re not seeing any signs of recession. And in fact, we’re seeing things continue to accelerate. It was a great job to report historically low unemployment, consumer discretionary spends and high-quality leisure travel experiences is really strong.

So we continue to see the opposite, which is more of an acceleration. Certainly, our visitation from the U.S. just looking at pacing bookings and the kind of ski season they’re having is terrific.And little things like this is the largest flight schedule in the history of Iceland Air happening in 2023, more destinations, more gateways, 950 departures a week inbound in Iceland for the season, which is all at record levels. So we’re actually quite encouraged.

Operator

Your next question comes from the line of Tyler Batory with Oppenheimer.

Tyler Batory

First question for me, a couple on the GES side of things. I think Steve made a comment 70% or what range, I think, in terms of shows. I think it’s 70% some show or 70% in 2019, some are 140% in 2019, a pretty decent amount of variability there, which may be a little bit surprising. Can you give a little bit more detail on the types of shows that are doing better or worse? And for the shows that are still quite a bit down versus 2019, what needs to happen for those to improve?

Steve Moster

Yes. It is surprising. It’s been this way for the last several quarters where on average, the same show growth versus ’19 has been relatively high, kind of in the 90-plus percent or close to 90%, even greater. But the variability has been there in each of the quarters. And each show has its own dynamics, but I can highlight a couple of industries that are slower to recover versus others. And so auto, some of the auto shows are slower to recover. Certain sectors of retail are slower to recover as well. But we’re optimistic. And I think I mentioned it during my talking points, but there’s a large opportunity as that variability decreases that creates a tailwind for us in the future.As to why those aren’t recovering. Some of it is industry-specific and some of it is just the international exhibitors not participating in 2022 and different shows have different level of international participation. I also see fewer small U.S.-based companies participating in 2022. And both of those, I think, will come back. It’s a question of when and I believe that will happen later in this year and into 2024.

Tyler Batory

Okay. Great. And then a follow-up question on the show rotation topic. I mean when I think of show rotation, I know that what was traditionally the big 3 shows for you guys, IMTS, MINExpo, ConExpo as well and I noticed that you guys are not participating in ConExpo. Can you address that a little bit more? I’m assuming that was a strategic decision, maybe lower profitability there. But maybe just talk about that decision, if there’s anything else going on in terms of competitive dynamics in the industry between you and other major competitor out there?

Steve Moster

Absolutely. When we had a long relationship with ADM, which is the producer of ConExpo and had a long relationship with them. When we looked at the pricing that we would need in 2023, for us, financially, it didn’t make sense from a margin perspective. Some of the changes that we’ve made in the organization allows us to be a little bit more nimble and be more selective on what we’re picking from a profitability perspective. And so we did propose pricing that got us to that level of profitability and the organizer went in a different direction.

Tyler Batory

Okay. Great. I appreciate that detail. Switch gears to the Pursuit side of things. I think you had made a comment attraction visitation will be 95% of 2019 levels on a same-store basis. I’m just kind of interested, I mean, how conservative could that be? I know you’re missing the travel trade long-haul from Asia, but the commentary seems very positive. Broadly speaking, the demand for leisure travel seems quite strong. The restrictions in terms of getting to Canada that have been removed. So I guess I’m just a little bit surprised that you’re still only expecting 95% recovery in terms of the attraction visitations.

David Barry

Yes, I think we’re being cautious and it’s important that we do be cautious. We’ve been surprised with things before. I think what we have is a number that’s very achievable and we’re focused on it. There’s still a lot of parts of recovery that are not certain. But definitely, while we feel momentum, we’re cautiously optimistic and encouraged. And I sense your enthusiasm, I applaud your enthusiasm, but my jobs could be steady on the wheel. So that’s what we’re going to do.

Tyler Batory

Okay. I appreciate that. And I think the last question for me, Steve, the sale of ON Services, it was small. But can you just talk a little bit more about the rationale behind that? And then I’m not sure on the M&A side of things, such as anything else that might make sense from either a sale perspective or perhaps what you’re looking at from an acquisition side of things as well?

Steve Moster

Yes. That’s a great question, Tyler. So you’ve seen some of the strategic decisions we’ve made within the GES portfolio. So we specifically have pulled out and organized the GES Exhibition team and then also our marketing agency team Spiro. And in doing so we really had a laser focus on simplifying the overall cost structure around exhibition. And as we look forward, the AV business for us in this strategy was really — it didn’t fit in well with us. It was a nonstrategic asset. And so we took the opportunity to sell the asset and feel good about that.And so when we look forward, a lot of our focus will be from a capital allocation perspective, as seen in the past, we’ve been investing on the Pursuit side of the business while we continue to improve the profitability on the GES side, and we’ll continue to do that.

Operator

[Operator Instructions] Your next question comes from the line of Barry Haimes with Sage Asset Management.

Barry Haimes

I had just a quick question for Ellen. You mentioned that there were some wage subsidies, I think, related to the COVID programs that you got in the fourth quarter ’21 that you didn’t repeat in ’22. Could you size how much that was in the fourth quarter ’21?

Ellen Ingersoll

Sure. That was about $700,000 in ’21 for the fourth quarter, Barry.

Operator

There are no further questions at this time. Steve Moster, I turn the call back over to you.

Steve Moster

All right. Thank you so much. And thanks, everybody, for joining us today. We look forward to giving you an update on the year in a month or in a quarter. So take care, and we’ll talk soon.

Operator

This concludes today’s call. You may now disconnect.